INTRODUCTION
The
Production Sharing Agreement (PSA) for the Sakhalin-1 Project became
effective in June 1996.
In September, 2000, the Sakhalin-1 Project completed drilling and
testing of the Chayvo 6 well, last well of a 5-year exploration
period. The Exploration Period included drilling of 7 appraisal
wells and acquisition of more than 1,200 square kilometers of three-dimensional
seismic data. The appraisal work under the PSA along with prior
exploration work conducted during the 1970s and 80s delineated Sakhalin-1
hydrocarbon resources totaling 2.3 billion barrels of oil (307 million
tons) and 17.1 trillion cubic feet of gas (485 billion cubic meters).
The Sakhalin-1 project includes three offshore fields: Chayvo, Odoptu,
and Arkutun Dagi. Exxon Neftegas Limited is the operator for the
multinational Sakhalin-1 Consortium (ExxonMobil interest 30 percent).
Co-venturers include the Japanese consortium SODECO (30 percent);
affiliates of Rosneft, the Russian state-owned oil company, RN-Astra
(8.5 percent) and Sakhalinmorneftegas-Shelf (11.5 percent); and
the Indian state-owned oil company ONGC Videsh Ltd. (20 percent).
Prior to the effective date of the PSA, the Odoptu field had been
identified in 1977 as holding potential oil and/or gas reserves;
the Chayvo field in 1979; and the Arkutun-Dagi field in 1989.
The Sakhalin-1 Consortium declared the project commercial on October
29, 2001 and the Russian Federation approved the declaration on
December 3, 2001 which formally ended the Exploration Period and
commenced the 20 year Development Period under the PSA.
In 2004, the Russian Government approved the Technical and Economic
Substantiation for Construction, which allowed Sakhalin-1 to start
full-scale construction of the project facilities.
Sakhalin-1 will be one of the largest single foreign direct investments
in Russia. Capital investment over the life of the project could
reach as much as $US12 billion (2002 dollars).
Project benefits to Russia include direct revenues, estimated at
US$40 billion, improvement of infrastructure, technology transfer
and the use of Russian suppliers for contracts and procurement.
Commercial development brings with it a contribution of $US 100
million to the Sakhalin development fund over a five-year period.
The project will also bring production bonuses of US$45M.
The Project will be executed in phases. The initial phase develops
the Chayvo field with production start-up targeted for the 3Q2005.
A dedicated oil pipeline and terminal facility at DeKastri on the
Russian mainland will export crude oil to world markets beginning
in early 2006. Full production is targeted for the end of 2006.
The initial gas production will be sold in the Russian Far East
domestic market of Khabarovsk Krai. Letters of Intent to sell natural
gas from Sakhalin offshore fields were signed with two Khabarovsk
Krai buyers on June 10, 2004.
Export of the remaining gas reserves via pipeline will commence
when a contract with a regional customer is secured. The Odoptu
and Arkutun Dagi fields will be developed as subsequent phases.
Chayvo Development
The Chayvo field will be developed from both offshore and onshore
facilities. The Chayvo Yastreb land rig construction was completed
in June 2002. The rig was engineered exclusively for Sakhalin-1
and is the most sophisticated land rig in the industry. It is designed
to drill extended reach wells to offshore targets from land based
locations. The unique Extended Reach Drilling (ERD) technology will
minimize environmental impact in the near-shore area. In June 2003,
ENL initiated the shore-based ERD program to install wells under
the seabed at distances exceeding 11 km. Five ERD wells have been
drilled to-date from Yastreb.
Oil and gas will also be produced from an offshore platform, called
the Orlan. The 20-well concrete structure will serve as the offshore
drilling and living quarters. The Orlan drilling rig will be operated
on the platform year-round. Offshore processing facilities will
be minimal, with a full well stream sent to shore for further processing
at the Chayvo Onshore Processing Facility (OPF). In 2004, Orlan
was towed to Korea for the construction completion and commissioning.
Installation of Orlan at Chayvo is scheduled for summer 2005.
Oil and gas will also be produced from an offshore platform, called
the Orlan. The 20-well concrete structure will serve as the offshore
drilling and living quarters. The Orlan drilling rig will be operated
on the platform year-round. Offshore processing facilities will
be minimal, with a full well stream sent to shore for further processing
at the Chayvo Onshore Processing Facility (OPF). In 2004, Orlan
was towed to Korea for the construction completion and commissioning.
Installation of Orlan at Chayvo is scheduled for summer 2005.
The Chayvo Onshore Processing Facility will produce at the rate
of approximately 12 million metric tons per year (250 thousand barrels
of oil per day) and 8 billion cubic meters per year of gas (800
million cubic feet per day). Chayvo OPF construction activities
are under way.
A 24-inch pipeline will be built from the Chayvo OPF to the DeKastri
export terminal on the Russian mainland. The pipeline construction
started in 2004 and is scheduled to be completed at the end of 2005.
The DeKastri terminal will provide storage and tanker loading facilities
for receiving 110,000 DWT ships. Year round shipping with conventional
tankers will be possible using icebreaking support vessels.
Local Content
The Sakhalin-1 Consortium continues work on implementing a comprehensive
Russian content strategy to identify and contract qualified Russian
companies and organizations with the skills and experience required
to conduct the work in a safe and environmentally responsible manner.
Small businesses in the northern districts of Sakhalin Island may
soon enjoy easier access to credit, thanks to a US $1 million micro-finance
program announced on September 22, 2003 at the US-Russia Commercial
Energy Summit by ExxonMobil, on behalf of the Sakhalin-1 Project
Consortium, and the US Agency for International Development.
Community investment activities: Sakhalin-1 has also embarked on
community investment activities that are broader in scope and purpose
than charitable giving. In addition to annual contributions to the
Sakhalin Development Fund (stipulated in the Production Sharing
Agreement), Sakhalin-1 is involved in the following initiatives:
| • |
In 2004 Sakhalin-1 and USAID launched
a $500,000 small business micro-finance program in the northern
Sakhalin districts of Nogliki and Okha, with the idea of
providing a “hand-up, not a hand-out” to entrepreneurs
who want to create jobs and capture more of the investment
dollars now working in their towns. Non-collateralized “peer
group” loans, plus business management training, will
allow new start-ups to get on their feet, gain experience
and collateral needed to “graduate” and obtain
those commercial loans, which are out of their reach today. |
| • |
Park beautification in Yuzhno-Sakhalinsk. |
| • |
Over $200 million to date has been
committed to public infrastructure work for project use,
such as upgrading roads and bridges in the north of Sakhalin,
port improvements in Kholmsk, and improvements to airports
in Yuzhno-Sakhalinsk, Bogorodskoye and Nogliki. In particular,
Nogliki airport received an extensive upgrade, with new
terminals, modern all-weather navigational equipment, and
runway paving. |
| Sakhalin-1
Phase 1 Facilities |
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Gas Marketing : Gas market development and sales
remain a high priority for the project. With natural gas resources
estimated at 17 trillion cubic feet (485 billion cubic meters),
the three fields in the Sakhalin-1 production area can provide a
large, long-term commercial supply of gas for export and also supplement
regional domestic supplies in Russia. The Chayvo field alone has
enough gas to produce 1 billion cubic feet per day (10 billion cubic
meters per year)
for more than 25 years. With the Odoptu and Arkutun-Dagi resources,
a production rate of 1 billion cubic feet per day (10 billion cubic
meters per year) can be achieved for more than 40 years.
Eventually,
sales in the Khabarovsk Krai may grow to 3 billion cubic meters.
Sakhalin's geographical location and proximity to gas markets in
Northeast Asia present a unique opportunity to access markets with
pipeline gas. The pipelines are the most economic method to deliver
gas to Northeast Asian markets. Pipelines will enable Sakhalin gas
to be delivered to a broader mix of markets and customers thus providing
additional diversity. Also, pipelines will enable natural gas to
create additional gas penetration by reaching markets that are not
easily served by LNG. Lastly, established markets in Northeast Asia
have the opportunity to diversify their gas transportation options
which will help creates additional supply security.
An assessment of gas export markets in Japan and China has been
completed and the Consortium has concluded that a pipeline, built
to international design standards, would be the most cost-effective
method to deliver gas to these export markets. Export pipeline gas
marketing discussions continue in several markets in NE Asia as
the Sakhalin-1 Project considers all options for pipeline gas export
sales.
Subsequent development is tied to long-term gas sales contracts.
Later project developments are expected to sustain export gas
production from all three fields to 2050.
Contact Information
